January 9, 2012

China looks set to impose a direct tax on its largest greenhouse gas emitters by 2015, according to reports in state media.

Proposals for an environmental tax are being reviewed by the Ministry of Finance and are expected to come into force before the end of the 2011-2015 five-year plan, the state news agency Xinhua reported today, citing government sources.

The plans include levying a tax of 10 yuan (£1) per tonne of carbon dioxide on the largest consumers of coal, crude oil and natural gas, a rate that would gradually increase depending on the companies' emission levels.

However, there was no mention of when these higher rates would begin. While the draft calls for the proposals to be implemented as early as this year, the newspaper said the launch would probably be delayed by economic uncertainties.

The prospective tax is the latest in a series of measures from the Chinese government designed to curb the country's soaring greenhouse gas emissions, which oil giant BP recently estimated made up a quarter of the world's total in 2010.

Most notably, the country's latest five year plan includes targets to reduce carbon intensity, the amount of CO2 produced per unit of GDP, by 17 per cent from 2011 to 2015.

To ensure the target is met the government has launched wide-ranging incentives to drive investment in low carbon energy, introduced tough new fuel and energy efficiency standards, and piloted carbon trading mechanisms in several provinces.

Late last year, the National Bureau of Statistics announced it was working to establish a system of measuring CO2 emissions at all major companies, which many commentators see as a crucial first step towards establishing both carbon markets and a carbon tax.